Food & Beverage Sector Analysis With The Help of Porter's Five Forces Model

Food & Beverage Sector Analysis with the help of
Porter’s Five Forces Model
In this COVID -19 situation, today’s market environment is very competitive and especially a Food &
Beverage sector which is growing all over the world. I have chosen this sector by taking advantage of
pandemic situation to study this sector well and in-depth, to maintain good portfolio and to earn
maximum amount of profit.
As an entrepreneur I would like to do my business in Food & Beverage industry which remains
unaffected in any adverse economic condition as food is the basic essential thing of living being
which no one can avoid to buy.
To know the feasibility of this business, ‘Five Forces Model’ is one of the best methods to analyze.
This model was coined by Michael E. Porter to help companies for assessing the nature of an
industry’s competitiveness and develop corporate strategies as per that. It is as follows
Porter’s Five Forces Model
Business
Bargaining Threat of
power of New
Buyers Entrants
Bargaining Rivalry Threat of

power of among Substitute
Suppliers existing Products
Competitors
Through this model, Porter classifies five main competitive forces that affect any market and all
industries. These forces that determine how much competition will exist in a market and also the
profitability and attractiveness of this market for a business. With the help of dynamic corporate
policies and strategic management, a business will aim to shape these force Food & Beverages.
With the help of above model, the analysis for the Pharmaceutical sector Business is as follows:-
1) Bargaining Power of Buyers:
It refers to the extent buyers are able to put pressure on the business, which is major factor of the
customer’s ability to react to price changes and influence the sale of the business.
In this sector, if consumers are more powerful, their tendency to negotiate raises especially the
price sensitive buyers as a result of which prices may be forcefully reduced and act as a threat for
company. With purchase decision, the bargaining power increases. If more commodities are purchased,
the bargaining power is thus enhanced. In this industry, bargaining power is very strong and demands
good quality with reasonable price. If prices are high, buyers will easily leave an company or can find
new substitute as various options are available in the market.
2) Bargaining Power of Suppliers:
It refers to the extent suppliers are able to put pressure on the business, when charging for the raw
materials or products that they give to it.
The bargaining power of suppliers is the reverse of the bargaining power of buyers. Usually,
restaurants, cafes would get food, raw material from external suppliers e.g. butchers, different FMCG
companies, farmers. The supplier is getting selected on the basis of his quality, price and discount basis
for the product. Thus, it is weak force.
3) Rivalry among Existing Competitors:
As the factor suggests, an industry with high rivalry among existing competitors is one which is
characterized by consistent price wars, high degrees of innovation, increased marketing attempts and
service improvements.
A competitive strategy with effective competitors will give the company a competitive edge over
other companies. In food & beverage sector, rivalry among competitors is very high. So, to sustain among
the existing competition, they use one of the following ways that could be change in prices, to focus on
differentiating the product and bring about improvements, to make use of creative channels of
distribution and also to exploit the relationship with suppliers. Still revenues can be obtained through
market expansion.
4) Threat of Substitute products:
A substitute product nearly performs the same function as the industry’s product and service
but by different means. A company operating in an industry with high threat of substitute products
suffers as they have to put a price ceiling to their offering. This, in turn affects an industry’s
profitability.
The threat due to substitutes increases when the product demand is affected by the change in the
price of the substitute product. Usually, threat occurs due to price variations, exciting offers and
discounts, marketing factor and customer loyalty, etc.
The real problem starts when buyers prefer choosing regular restaurants or street food or prefer
to eat at home itself; and not due maintenance of average price by all hotels. Here, options are increasing.
This threat can be reduced by focusing on consumer preferences, needs and wants, attraction.
5) Threat of New Entrants:
In Food & Beverage sector, threat towards the new entry in the market is very huge. This is
because government has put very few restrictions, rules & regulation to enter in this market.
Nowadays, anyone can easily enter in this industry and set his business with good quality, reasonable
price, good network, marketing skills or can hire expert for the same and with some jolly place
having beautiful environment.
It is also cheaper to start hotel than any other business and it will also give good returns in less
capital investments. Also, experience held by the businessman is vital factor and not only the product
or service.
Conclusion:
Porter’s Five Forces Model gives fair idea about the sector in which business operates and how 5
forces namely; Bargaining power of Buyers, Bargaining power of Suppliers, Rivalry among existing
competitors, Threats of Substitute Product, Threat of New Entrants influence on the same.
Here, in Food & Beverage sector bargaining power lies in the hands of consumer itself which is
very high and act as a threat to the business. Reversely, bargaining power of suppliers is low. To deal
with the rivalry among existing competitors, strategic management can be used.
Here, threat of substitute product is very high as buyer has high bargaining power, he can easily
switch to the different seller. Government has kept very less barriers on the entry of new commerce in
this sector, hence it is hard to sustain for long. But, through experiences, dynamic strategies, customer
relationship management for attaining customer loyalty, creating goodwill, affordable prices, finding
buyers preferences is the golden key to sustain in long run.

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Food & Beverage Sector Analysis with the help of

Porter’s Five Forces Model

Porter’s Five Forces Model

Bargaining Rivalry Threat of

1) Bargaining Power of Buyers:

2) Bargaining Power of Suppliers:

3) Rivalry among Existing Competitors:

4) Threat of Substitute products:

5) Threat of New Entrants:

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